GRANTS MANAGEMENT SYSTEMS | FRINGE BENEFIT POOL
Note: the following article is based on an allocation procedure where the actual fringe benefit rate is used rather than a fixed rate.
When an expense is coded as a fringe benefit, the element used is 998000. (This is a control account set up in the GMS system and cannot be changed.) Typically the transaction codes set up for fringe benefits follow immediately after GL code 505000. An example would be GL code 50600 – FICA Fringe Benefits. (50500 is the control account that is used to allocate the fringe costs in the pool to the financial statements and cannot be changed.) All transactions coded to element 998000 are accumulated, by line item, on a year-to-date basis.
The system then looks at the year-to-date fringe benefit costs, on an individual line item basis, and allocates a percentage of the total cost to each individual class using the ratio of the YTD base amount (typically salaries and leave) to the YTD total base of the classes that receive each benefit. For example, let’s say the YTD FICA expense for the organization was $24,400. Class 1 total base was 168,660 and the agency total base was 321,330. The ratio of the class 1 base to the total base is 168,660/321,330 or .5249. The system then applies the .5249 against the YTD total agency FICA 24,400. That results in 12,807.56 FICA expense being allocated to class 1. The system then follows the same procedure for the FICA expense for all remaining classes who receive the FICA benefit.
Once all classes have been accounted for and the total YTD FICA expense has been allocated, the entire process is repeated for the next and all subsequent fringe benefit costs. At the end of the process the total of all fringe benefit costs allocated to each class is then compared to that class’ base. For example if the total allocated class 1 fringe benefit costs is 60,750, the ratio of that amount against the class 1 base is 60,750/168,660 or .3602. That 36.02% fringe rate is then applied to all class 1 salaries during the cost allocation process. Note: If your organization uses the fringe pool in the GMS software it is imperative that you use the calculated fringe benefit rate(s) when preparing your program budgets. Too often we see clients using the fringe pool to allocate their fringe benefits but they create program budgets based on individual employee costs. In addition to saving an incredible amount of time in budget preparation when using the fringe rate (s), you should always be using the same procedure for your budgeting as you do your accounting to give you the most realistic budget comparative on your financial statements.
